House price growth stable as January ‘price war’ kicks off with mortgage lenders

FOLLOWING lacklustre reports last week about the health of the UK property market in December, this morning Halifax suggested average house price growth remained ‘stable’ last month, although house prices were 0.4 per cent lower in the final quarter of 2018 than they were in the preceding three months.

According to the Halifax House Price Index, prices in the three months to December were 1.3 percent higher than the same period last year, and values increased month on month by 2.2 percent, taking the average house price in the UK to £229,729 from £223,116 in December 2017. Predictably, Brexit featured in the lender’s commentary about how the UK market may perform in 2019. Russell Galley, Managing Director of Halifax said: “In 2019, we’re expecting continued stability in house prices with between two percent and four percent price inflation. “This is slightly stronger than 2018, but still fairly subdued by modern comparison. However, this expectation will clearly be dependent on the Brexit outcome, with risks to both sides of our forecast.”

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On the ground, the market remains tentative and the sales which are agreed are taking much longer than previously

Jeremy Leaf, Former RICS residential chairman

However, Russell also acknowledged that other factors may impact the market, with the need to raise a significant deposit still acting as a restraint for those looking to buy a new home and potentially limiting the number of purchasers.

This morning’s Halifax report also highlighted that mortgage payment affordability is more difficult to predict due to competing pressures with signs of positive annual pay growth supporting affordability, but the risks associated with the potential for higher interest rates also apparent.

These factors potentially provide a counterbalance which may see any house price growth at headline level over the course of the year remain modest.

Former RICS residential chairman, Jeremy Leaf, cautiously responded to the report and suggested: “At first glance the Halifax numbers are really positive as they reflect a time of particular political uncertainty and the height of Brexit turmoil.

“But when taken with the recent fall in transactions it is clear that the increase has more to do with a shortage of stock rather than a bounce back in the market generally.”

Jeremy continued: “On the ground, the market remains tentative and the sales which are agreed are taking much longer than previously, which is only heightening indecision.”

But this isn’t necessarily the picture across the whole of the UK.

The Royal Institution of Chartered Surveyors and Rightmove, two other highly respected property data sources, have reported a disaggregated market for most of 2018, with activity and price increases in regions such as Scotland, Wales, the Midlands and Yorkshire and the Humber at significant levels as consumer confidence has remained strong, despite the ongoing ‘Brexit drag’ on the market in other areas, such as London and the South East.

Another factor that may support the market during the first few months of 2019 is, according to Brian Murphy, Head of Lending at Mortgage Advice Bureau, many lenders appear to have started the year in ‘January sales mode’, and that a slew of rate reductions released by various lenders over the last few days have perpetuated an ultra-competitive market place as far as residential mortgage products are concerned.

Brian explained: “This is likely to be a result of many lenders now being in the final quarter of their financial year and possibly seeking to stimulate new business before they close the books in March.

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House prices: The market is uncertain this year due to Brexit, experts say (Image: Getty Images)

House prices: The need to raise a big deposit is still holding back those who want to buy a new home (Image: Getty Images)

“As such, this benign lending environment may well support the housing market over the next two or three months whilst clarity on the UK’s departure from the EU is still awaited.”

Of course, low mortgage rates don’t just benefit buyers, but those remortgaging as well who are likely to be able to bag a bargain rate, particularly on five-year fixed rate products which are now, in many cases at or around 1.8 per cent, which is nearly as low as the ultra-cheap two-year fixes we’ve seen of late.

Only yesterday, high street lender Barclays announced a raft of rate reductions. For example, their existing five-year fixed rate product of 1.94 per cent was reduced to 1.87 per cent, whilst their two-year fixed rate was reduced from 1.97 to 1.84 per cent, both of which are available to both new and existing customers.

Of course, some of the ‘bargain’ rates do come with application fees, and the cheapest rates of all are likely to only be available to those with higher levels of equity in their property.

But with 90 percent Loan To Value product rates sitting at just over two percent with some lenders, it’s potentially a good time to secure a competitive rate, even for those with lower amounts of equity, providing that borrowers are prepared to take the time to research the market.